What You Need to Know About That Money You’re Planning To Use As A Down Payment

In this short episode Tom and Michael cover an important issue you need to consider if you recently transferred funds into your account for a down payment.  ---- Transcript   Tom: Greetings, and welcome to the remote real estate investor. Today we're going to talk about financing, specifically eligibility of funds to be used for your down payment and be held in reserve.   Alright, let's do it. Michael, why don't you lead us on this little riff of today's weekend wisdom?   Michael: Yeah. So it's, I think, a really important topic to touch on, because I think it catches a lot of people by surprise. And really what it is, is is called seasoning the funds. And that's not like seasoning your cast iron skillet or seasoning your food. It's, it's having the funds available in the account for long enough to satisfy the lender, such so that they understand that those are your funds. So I'll give you an example of this. I had a lender Tell me, Michael, your down payment needs to be in your account three months in advance of the loan funding. So there was a small inheritance that I received when a family member passed. And so that came in, and that's kind of what made me decide to buy this property that I was going to and the lender was like, Whoa, what's this big check deposit here, you can't use that as part of your down payment. And so I had to write a letter of explanation and explain what's going on and show them a death certificate and all this kind of poop law stuff. But so just be aware of that.   For a lot of lenders, I don't know if three months is like the Fannie Freddie conventional loan minimum requirement or the standard that set but that's what it was, for me with this particular lender was I had to have the funds for the entire down payment in the account sitting there three months prior to funding. And so if you're going to be using a keylock or some other form of funds that aren't in your account, right now, just you want to talk to a lender about how long you need to have the funds sitting there. And I don't know how it would work with like, a sale of stock portfolio or that kind of stuff, I think, because they look at all that when they underwrite. So my guess is that they would be okay. And I think what they told me in the past was, we need to see the amount going from your stock portfolio to your bank account. And you need to show us like the bill of sale, essentially, from the stock portfolio. And that number needs to match up exactly, so that I can prove that the money came from my own stocks and went to my own bank account.   Tom: Yeah, that's a great rule of thumb, I think 90 days, and you'd be surprised how unique each bank and each lender is on these types of requirements, taken out many different loans, it seems like each one had their own kind of unique flavor on that amount of time. But I'd use that as a good baseline as if you know, you have funds that are you going to be used to be buying with debt is to get them in place, you know, a few months in advance of when you do the purchase just so when it comes with financing, it's no questions and smooth process.   Michael: Yeah. And I think to just I would also ask the question in advance of like what you need to do, because, for me, in my instance, I was selling stock in order to buy a property. And if the property purchased didn't end up happening, or I was still kind of on the fence about it, I would have been pretty bummed that I had sold those stocks. So you want to make sure if you're going to be moving funds from one form of investment vehicle to another that causes a transaction or a taxable event or what have you. You just want to be very well aware and pretty committed to that because you have a taxable event and you sell stock and you're like crap, I'm not gonna buy the house anyhow, that's that can often be a bummer.   Tom: Yeah, for sure. I know some banks will count stocks at some discount if they're still like being held as an equity